HL Deb 14 May 1992 vol 537 cc502-12

7 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Strathclyde)

My Lords, it may now be convenient for me to repeat a Statement made by my right honourable friend the Secretary of State for the Environment in another place. The Statement is as follows:

"With permission, Madam Speaker, I should like to make a Statement about local government finance and community charge capping in England. Local authorities have now set their budgets and charges for 1992/93. The vast majority of budgets are at sensible levels reflecting what charge payers and the country can afford.

"Over 400 authorities have budgeted within or very close to the limits implied by the provisional capping criteria announced last autumn by my right honourable friend the Member for Henley. This outcome clearly demonstrates that my right honourable friend was more than justified in his belief that authorities would find his provisional criteria manageable.

"In overall terms the total of local authority budgets is about 1 per cent. over the amount for which we made provision in our settlement, and the average headline charge is £282, with the average amount of charge actually met by charge payers being under £200. This result is in no small part a tribute to the good sense and responsibility of local government.

"I have carefully considered authorities' budgets. In the light of these budgets and all other relevant considerations I have now decided my capping principles—that is the criteria in accordance with which I must designate authorities for capping. The principles I have today adopted give effect, with one modification, to the provisional criteria announced last autumn. This modification is that I have included a de minimis proviso. This will avoid designation in cases where the reduction which could be secured by capping would be less than £1.50 per adult.

"I have decided that this de minimis principle will be appropriate this year having regard to a number of considerations. These considerations include the provisional criteria, the budgets which all authorities have in the event set bearing in mind that in the great majority of cases they reflect what charge payers and the country can afford, and the scale of reductions in budgets and the costs of rebilling and associated expenses which, but for this principle, would be required. It should not be assumed that in any future year we would judge such a de minimis principle to be appropriate. On the basis of these

Community charge capping 1992–93 Table of designated authorities and proposed caps
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7
Authority 1992–93 budget Proposed cap for 1992–93 Proposed reduction Proposed cap change on 1991–92 budget Original average community charges for 1992–93 Community charge reduction implied by proposed cap
(£ million) (£ million) (£ million) (Per cent.) (Per cent.) (£) (£)
Absolute Excessiveness
Basildon 27.01 20.15 6.86 25.4 -8.8 361 58
Langbaurgh 18.50 16.50 2.00 10.8 5.8 376 18
Middlesbrough 21.60 20.20 1.40 6.5 0.0 353 14

principles, 10 authorities are to be designated. These are Basildon, Cheltenham, Gloucester, Gloucestershire, Greenwich, Hillingdon, Lambeth, Langbaurgh, Middlesbrough and Warwickshire.

"For each of these 10 authorities I am also proposing caps —that is the levels to which we propose authorities should reduce their budgets. I have made available in the Vote Office, and shall be printing in the Official Report, a table setting out my principles and showing for each designated authority the cap that I am proposing and the budget reductions implied by it. In each case I am satisfied on the basis of all the information currently available to me that my proposals are reasonable and appropriate in all the circumstances of the individual authorities concerned, and that the reductions I am proposing are achievable this year. The reductions in charge range from £58 for Basildon to £3 for Gloucester.

"Authorities now have 28 days in which to tell me whether they accept the amount proposed. They can also challenge my proposal, suggesting an alternative figure together with reasons for it. In such circumstances it is open to me to set the final cap at a higher, lower or, indeed, the same level as the one I originally proposed. If an authority does not accept my proposed cap I have to set the final cap by order, a draft of which must be approved by the House.

"Within 21 days of the final caps having been set the authorities must set new lower budgets reflecting their caps which feed through to lower charges. How long the process takes depends in part on how authorities respond to my proposals, but I expect that by the end of June or early July all authorities will have set new budgets leading to reduced charges.

"We and local government generally can rightly find satisfaction in the sensible and prudent way the vast majority of authorities have budgeted. But a few authorities are still failing to act responsibly. Parliament has given me powers which enable me both to secure as necessary the expenditure restraint by local authorities needed to meet our wider economic goals, and to protect all charge payers against excessive budgeting. My decisions today reinforce our strategy of expenditure control and will benefit about 1.8 million charge payers."

My Lords, that concludes the text of the Statement.

Following is the reffered to:

Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7
Authority 1992–93 budget Proposed cap for 1992–93 Proposed reduction Proposed cap change on 1991–92 budget Original average community charges for 1992–93 Community charge reduction implied by proposed cap
(£ million) (£ million) (£ million) (Per cent.) (Per cent.) (£) (£)
Excessive Increase
Cheltenham 10.84 9.91 0.93 8.6 6.6 330 12
Gloucester 10.34 10.15 0.19 1.9 10.3 310 3
Gloucestershire 327.80 317.91 9.89 3.0 6.5 279–347 25
Greenwich 228.81 220.04 8.77 3.8 3.3 287 56
Hillingdon 167.14 166.27 0.87 0.5 10.3 295 5
Lambeth 333.20 328.79 4.41 1.3 5.7 449 23
Warwickshire 299.76 292.99 6.77 2.3 6.5 290–353 19

Notes:

A. Designation is on the basis of the following criteria:

1. any increase of more than 6½ per cent. over the previous year's budget is an excessive increase if it gives rise to a budget over SSA;

2. any increase of more than 4½ per cent. over the previous year's budget is an excessive increase if it gives rise to a budget of over 5 per cent. above SSA;

3. any increase of more than 2½ per cent. over the previous year's budget is an excessive increase if it gives rise to a budget of over 10 per cent. above SSA;

4. any budget more than 12½ per cent. above SSA is excessive save that an authority will not be designated if:

  1. (a) its budget is 30 per cent. or less above SSA and is a cash freeze or reduction on its 1991–92 budget
  2. (b) its budget is 60 per cent. or less above SSA and at least 5 per cent. below its 1991–92 budget
  3. (c) its budget is at least 10 per cent. below its 1991–92 budget

5. if the excess in an authority's budget over the above criteria is less than the equivalent of £.1.50 per adult that authority is not designated.

That criteria for inner London boroughs are the same as for other classes of authority save that for the purposes of comparison the amount of inner London education grant is deducted from budgets.

B. Column 1 of the table lists those authorities designated since their budgets are excessive (criterion 4 above) or represent an excessive increase over the previous year (criteria 1 to 3 above).

C. Column 2 shows 1992–93 budgets set by the designated authorities.

D. Column 3 shows the proposed caps for 1992–93.

E. Column 4 sets out the reductions in budgets implied by the proposed caps both in terms of cash and percentage.

F. Column 5 shows the percentage change from the 1991–92 budget to the proposed cap.

G. Column 6 lists the original average community charge or charges in the area of each designated authority for 1992–93.

H. Column 7 shows the reductions in community charges implied by each proposed cap.

7.5 p.m.

Baroness Hollis of Heigham

My Lords, we first thank the Minister for repeating the Statement made in another place. The Statement designates some 10 local authorities for capping by virtue either of the increases on their budget over last year's spend or by the increase in their spend over their standard spending assessments, or some combination of both.

I have some questions for the Minister. As regards the budget spend, does the Minister accept that local authorities face additional government prescribed responsibilities without adequate additional government resources to pay for them? I refer for example to the responsibilities involved in the Education Reform Act, the Children Act, the new code of guidance on homelessness or the preparations for community care. Does not the Minister accept that a revenue support grant increase of less than 5 per cent. over last year, given local authority wage increases, will not even allow local authority budgets to stand still in real terms, let alone meet these additional responsibilities?

I now turn to the other part of the nutcracker squeeze on local authorities, the standard spending assessment, which assumes standard spending to meet a deemed level of provision. Does the Minister accept the view of the Audit Commission and all the local authority associations, including the Conservative-led ones, that the structure of SSA is now held to be neither fair nor reasonable when Surrey is given more to spend per child on primary education than Wigan or when Brent is given more to spend on snow clearance than Cumbria? As regards two items, capital debt and population, does the Minister think it fair and reasonable that an authority should be compensated if it is attractive enough to attract tourists because it happens to be Westminster, or because it has a race course or is by the seaside while the deprivation that a district authority's population may have in terms of unemployment and homelessness is completely ignored? That system privileges Westminster and penalises Consett.

Does not the Minister understand that capping based on such SSAs is deeply resented as unfair? The Minister referred to Cheltenham and the city of Gloucester. Is it not the case that boundary changes this year have not been fully taken into account by the DoE and therefore this calculation is almost certainly flawed? The Conservative led Association of District Councils certainly argues that that is the case.

Basildon has an SSA of £12.1 million. Is it not the case that by law Basildon is required to meet its debt charges of £8.5 million and has to meet £3.8 million on poll tax and therefore the Government prescribed SSA is lower than its statutory responsibilities? That is the case before we even consider services.

Is it not the case also that the SSA equivalent for Middlesbrough in 1989–90 of £17 million is still the same three years later while the average SSA for district councils has doubled in that period? As regards the Conservative-run Hillingdon, does not the Minister accept that this Conservative authority claims it has overspent entirely to meet the needs of refugees as required by the new code of guidance on homelessness? Does not the Minister accept that it is unfair that that is not taken into account?

Is it not also the case that Langbaurgh has cut its spending each year and every year in the past five years but its SSAs are so low that even though it has two and a half times as many children taking free school meals and one and a half times the level of unemployment of other areas nonetheless it is at the bottom of the Audit Commission's family for SSA? Is that not unfair? The Minister will say—as he said in the Statement—that such authorities can appeal. Almost every one of the authorities needs to appeal as I would argue that almost every one of the calculations is flawed.

Given the late announcement of the Government's timetable and the timetable for appeal, is it not the case that, should authorities appeal, it will be August or September before they can send out their revised bills? Will that not mean that it will be that much harder to collect the outstanding poll tax? Is it not unreasonable to be seeking to close down the rates, collecting poll tax and sending out new bills while simultaneously trying to prepare for the new council tax? Would it not be simpler this year to set the process of capping aside in order to move, in consultation with local authorities, into the new regime of council tax in good faith and with good grace?

Looking beyond the financial argument, I should like to ask the Minister whether he accepts the democratic argument. It is clear that SSAs are widely discredited. On the democratic side, we are not opposed to capping as such but concerned with who does the capping—the electorate or the Secretary of State. Does the Minister not accept that we have just had not only a general election but local elections in which local people expressed their views? Is it not the case that the Secretary of State proposes to set aside the verdict of 1.8 million people as to the appropriate level of local expenditure and substitute the verdict of just one man, himself?

Does the Minister not agree that that sits ill with a government claiming the principle of subsidiarity when it comes to the European Community but denying the same democratic mandate to democratically elected local government?

Finally, some time ago a Minister for local government said that the people of an area certainly will be able to vote for a relatively high spending authority if they so choose. That was Mr. Michael Howard, speaking in April 1988. Does the Minister still share that view, and if so why is he bringing this Statement forward?

Baroness Hamwee

My Lords, I too should like to thank the Minister for bringing the Statement to the House and reading it nicely for, like the noble Baroness, I find that there is little in its content which I can welcome.

There were two comments in the Statement which struck me forcibly. One was that it was the belief of the Secretary of State that authorities will find the criteria manageable. One cannot assume that because almost all authorities have met those criteria they necessarily find them manageable. They have met them, but in many cases they have done so with enormous difficulty, facing increasing responsibilities in areas where, by statute, new responsibilities are placed at their door. Those are responsibilities which they would happily undertake as the local authority, knowing local needs, but which they find it difficult to undertake since they lack the resources to do so properly. That applies in areas such as the Children Act, the Environmental Protection Act, community care and so on. In addition, local authority costs are rising above the rate of inflation as a result of wage settlements. Local authorities do not find what they have to do within their constrained budgets manageable.

The final sentence of the Statement indicates that the strategy will benefit about 1.8 million charge payers. The people who are not referred to in the Statement are the recipients of council services. How do they view the results of local authority capping?

I hold no political brief for many of the authorities which are included in today's Statement. However, it is noticeable that they are councils from across the political spectrum. Indeed, in most cases the budgets set by those authorities have had all-party support within the authorities.

There are of course anomalies. The criteria for capping are such that no doubt soon it will be a suitable subject for senior academic research to trace the way the criteria have changed over the years and try to understand the mentality which has led to those changes in criteria. It has to be said that there are many in the local authority world who see no other way of approaching the matter than working out the answer that is wanted and then finding a way of achieving it. There are anomalies. A Conservative authority which is just outside the London boundary has a budget which is much further above the SSA than those of many of its neighbours, largely because of Conservative overspending on civic offices in the recent past. Presumably because its budget is close to last year's budget the authority has not fallen within this net.

It was no surprise to me to hear on the radio in the cab which I took to get here for this Statement that all the London boroughs have announced that they will appeal. The energy that will have to go into those appeals would have been better directed elsewhere.

I shall make one final comment. It strikes me that the sum involved is not merely taken off the amount to be paid by poll tax payers, in many cases it represents a substantial proportion of each authority's total budget. To find means of reducing one's budget by 25 per cent. will cause terrible upset—and, as I said, that particular authority is not one for which I hold a brief. The same applies where authorities have to reduce their budgets by 11 per cent., 6 per cent. or 9 per cent.

We on these Benches do not support excessive overspending by some authorities but we do not support this method of tackling that overspending. It is a matter for the electors of those authorities. The ballot box is the way to control expenditure.

Lord Strathclyde

My Lords, I am very grateful to both noble Baronesses for the way in which they put their cases forward.

Perhaps I may respond first to aspects of the speech of the noble Baroness, Lady Hollis. She asked me dozens of questions, many interrogative. I know that she does not expect me to answer every single one of them. Perhaps I can answer them in general.

The main point that I should like to make is that my right honourable friend the Secretary of State studied all the relevant considerations. His proposals are reasonable and appropriate and we believe that they are achievable. Both noble Baronesses mentioned the prospect of appeal. Any authority can appeal within the next 28 days. Authorities can come forward with their own facts, figures and reasons for making their decisions. That information will be considered carefully by my right honourable friend. The noble Baroness, Lady Hollis, was concerned that the appeal process would take a long time. We desire the process to be completed in all cases by the end of June or at the latest early July. We do not see any reason for the process to take longer.

Both noble Baronesses touched on the principle of capping versus the ballot box. I have a problem with the arguments they put forward. We believe that capping is necessary, for two main reasons: first, to protect the overall financial position of the economy as a whole and overall public expenditure; secondly, to protect the charge payer who, in many parts of the country is paying far more than we consider appropriate. It is also a matter of principle.

The noble Baroness will know that I spent a considerable part of the general election campaign in Scotland, where her party and the Liberal Party were proposing a Scottish parliament. That Scottish parliament would have been capped. There appears to be one principle for the Scottish parliament and an entirely different principle for the Scottish local authorities. I do not think that the noble Baroness will have an answer to that conundrum.

The noble Baroness also referred to boundary changes in Gloucester and Cheltenham. I understand that there can be some argument as to whether the right amount of money was taken into account. But I understand that the department's calculation took full account of all boundary changes.

We were told by the noble Baroness, Lady Hollis, that the SSA system is widely discredited. But it is based on detailed research evidence and extensive discussions with local authority representatives. They have been reconsidered annually since their introduction. No one pretends that the SSA that is given to individual authorities will be the figure that they like most. But in generality I believe that it is a system that is successful and essentially supported by most people.

We had the argument that services which people had voted for would be cut. However, time and again with capping there are dire predictions which in the event have not been borne out. As I have already said, we believe that the caps are reasonable, appropriate and achievable in all the circumstances of the authorities concerned.

I do not pretend for one moment that I have answered all the questions. However, I hope that the noble Baronesses believe that I have covered sufficiently the generality of the subject.

7.22 p.m.

Lord Boyd-Carpenter

My Lords, I am sure that the House is much indebted to my noble friend for repeating this very important Statement. I am sure the House feels that with a matter of such importance it is right that this House should share with another place the receipt of the information as to those important Government decisions.

Is my noble friend aware that some of us believe that in view of the very large amounts of public expenditure involved in local government work it is essential that the Government—who have the ultimate responsibility for the management of the economy—should be able to limit and control. Expenditure of that amount is significant in the management of the British economy. Unless central Government—which have responsibility for the management of that economy—can control and limit it, they are in a poor position to manage the British economy.

I for one am very glad that the Government have been prepared to take the action which my noble friend has announced—an action which involves a good deal of courage. In a way it would be easier and more pleasant to let the whole thing go. It is very much to the Government's credit that they have not taken that line but have decided quite firmly to cap those 10 authorities.

The other importance of capping is this. The capping affects 10 authorities. I do not know, none of your Lordships knows, whether on appeal any of the 10 will be able to justify the amounts that they proposed to spend. However, the fact that they have been capped, and that it has been known that the Government have the power to cap, undoubtedly has had a very salutary effect on a great many other local authorities who, in order to avoid capping, have exercised greater restraint in the expansion of their expenditure than they otherwise would. The benefit to the national economy of the Government's action is not therefore confined to the 10 authorities affected, but goes very widely over the whole scale of local government expenditure because of the knowledge that every local authority has that if it acts in a way which involves excessive expenditure it too could be capped.

Therefore I welcome not only the action of my noble friend in repeating the Statement, but the courage and resolution which the Government have shown in doing what the noble Lord has told us that they have done.

Lord Strathclyde

My Lords, I am very grateful to my noble friend Lord Boyd-Carpenter for the points that he has made. He is absolutely right. Local authorities spend a substantial proportion of national wealth—some £60 billion a year. It would be irresponsible of any government not to consider that position when making their decisions on whether or not to cap. That is why we have been brought to this decision.

The second point that my noble friend made was that only 10 authorities have been designated for capping. Last autumn when we laid out the provisional criteria for capping, we said that the criteria would be tough but manageable, and that local authorities could not be exempt from the need for expenditure restraint. The vast majority of local authorities was responsible. Those authorities realised that they had to fit their spending within the overall criteria. That demonstrates that we were right to have capped in the past so that local authorities realised what was at stake. This year it is 10 authorities. In the future it is to be hoped that we shall see a shrinking number of authorities which have to be capped.

Lord Desai

My Lords, this is much ado about nothing. A lot of macho politics is being played in the DoE. In the Autumn Statement, the Government stated that they were going to have a PSBR of £10.5 billion for 1991–92. They ended up with £14 billion. This is a Government who have spent over 35 per cent. more than they originally estimated. They make a fuss about less than £40 million compared with the billions of pounds that the Minister said authorities are spending. We are talking about fractions of fractions.

I welcome the de minimis clause relating to £1.50. It is an interesting sum; I do not know who thought of it. Let us consider 5 per cent. as a limit; that if a local authority were 5 per cent. above expenditure, perhaps one could forgive it. I assume that six out of 10 authorities are being cut by less than 5 per cent. Is it worth making all this fuss about the fact that Hillingdon is being reduced by 0.5 per cent? That will take £5 off the poll tax. Is that worth our time, their time and the poll tax payers' time?

It has been made quite clear that this fuss is based on two fallacies. First, that overspending by local authorities is inflationary. Even on a monetarist doctrine, that is not true because local authorities do not print money. Secondly, local authorities are subject to democratic control. So long as their voters approve, who cares if the local authorities do or do not overspend money?

This procedure is order to obtain political mileage. The election is over and we should stop playing these silly games. I believe that it is a lot of fuss about nothing. I am sorry that we have to go through this procedure. I do not believe that any one will thank the Minister for the position, but I thank him for repeating the Statement to us.

Lord Strathclyde

My Lords, that was an entertaining speech from the noble Lord, Lord Desai. I enjoyed being called politically macho. The noble Lord did not agree with my noble friend Lord Boyd-Carpenter. However, my noble friend's speech deserves re-reading tomorrow. I suspect that the noble Lord, Lord Desai, and this side of the House essentially disagree on the issue. We do not believe that it is about fractions of fractions. We believe that important principles are at stake, substantial sums of money, and a valuable discipline for local authorities and central Government.